Is This an AI Bubble? A Leaked Treasury Report, a Global Central Bank, and Michael Burry All Just Said the Same Thing

I wrote recently about the $1.65 trillion in AI-related debt that doesn't show up on Big Tech's balance sheets. That story turns out to be one data point inside a much bigger, much more contested argument playing out right now at the highest levels of global finance — one where a leaked internal U.S. Treasury report, the world's central bank for central banks, and the investor who famously shorted the 2008 housing market have all, independently, started asking the same uncomfortable question: is the AI boom a genuine economic transformation, or the most expensive bubble in modern history quietly building underneath it? The direct answer: This is a genuinely live, contested debate among serious economists and institutions, not a settled question. A draft U.S. Treasury report, obtained by NOTUS, warns that AI firms are more deeply entrenched in the broader economy than dot-com era companies were, meaning a downturn could send shockwaves through stock markets, private credit, chipmakers, and utilities simultaneously. The Bank for International Settlements has separately warned about AI-related credit risk and contagion potential. Meanwhile, serious institutional voices including Goldman Sachs and JPMorgan argue the spending is fundamentally justified by real productivity gains. Both sides are making evidence-based arguments — this hasn't resolved into consensus in either direction. Quick Facts Detail Figure / Finding Global AI spending, 2026 projected Over $2.5 trillion (44% increase year-over-year) Combined "Magnificent Seven" share of S&P 500 Approximately 33% Fund managers flagging "AI bubble" as top tail risk (BofA survey) 45%, up from 11% two months earlier Tech companies' corporate bond issuance, late 2025 quarter $108.7 billion Hyperscaler capex increase, projected 2026 64% year-over-year, exceeding $500 billion J.P. Morgan's projected additional AI spending, next 4 years $5 trillion Leading AI stock price-to-sales ratios Above 30x — historically associated with sharp corrections Notable public bear Michael Burry, investor known for predicting the 2008 housing crash The Leaked Treasury Report This is the most consequential single document in this entire debate, precisely because of who wrote it and how much it diverges from public messaging. A draft report circulating inside the U.S. Treasury Department, obtained by the outlet NOTUS, warns of risks the AI market poses to the broader economy, explicitly likening aspects of the current situation to the dot-com bubble that devastated markets in the early 2000s. That framing is a significant departure from the current administration's public posture, which has consistently emphasized encouraging unrelenting AI investment to unlock exponential growth. Career Treasury analysts reportedly found that AI firms are more deeply entrenched in the broader U.S. economy today than dot-com era companies were at their peak — meaning a serious downturn in AI wouldn't stay contained to tech stocks. The analysts described potential shockwaves spreading across stock markets, private credit markets, companies financing data center construction, cloud providers, chip manufacturers, and utilities simultaneously. Notably, the report stopped short of predicting an imminent crash on the scale of the early-2000s bust — the analysts' actual conclusion was narrower: that a downturn would likely cause reduced investment, eroded investor confidence, and slower economic growth, not necessarily an immediate collapse. Separately, Senator Elizabeth Warren and other Senate Democrats have pushed for legislation requiring financial firms to disclose their AI-related exposure to Treasury specifically so regulators could identify risks earlier. Warren's own public framing was blunt: AI and Big Tech companies, in her words, are increasingly reliant on shadowy forms of debt and balance sheet arrangements to fund multi-trillion-dollar AI buildouts, and her proposed legislation is intended to give regulators the information needed to catch risk early rather than after a crisis has already begun. The BIS Warning The Bank for International Settlements — effectively the central bank that coordinates and advises the world's national central banks — issued its own stark warning in a 2026 annual report, flagging AI bubble burst risk alongside private credit exposure and limited policy response capability if conditions deteriorate. The BIS specifically flagged that AI capital expenditure is increasingly financed through debt rather than existing cash flow, that credit spreads tied to this financing are widening, and that circular investment patterns among AI companies — where the same capital effectively cycles between a small number of interconnected firms — meaningfully increases the risk that trouble at one company spreads to others. That circularity concern echoes a broader worry several analysts have raised: much of the AI infrastructure boom involves a relatively small number of companies simultane